Ms. Raw, a Portfolio Manager of the BlackRock Commodity Strategies Fund, notes that in terms of the fund’s mining and gold investments, the portfolio is currently overweight iron ore. “That is quite a contrarian view, because many people are worried about the iron ore market over the next three years,” she says. “Our view is very much that we believe the iron ore price is going to outperform people’s expectations, rather than necessarily that the iron price is going to rise.”

“The nature of the cost structure in the industry, where you have some very high-cost iron ore producers keeping the price at this level, will last longer than possibly the market expects means that if you’re exposed to very low-cost producers like Rio Tinto, for example, or Fortescue in Australia, then they will be able to sustain good margins,” Ms. Raw explains.

“Particularly if they have growth in production over the next three years, and even if prices do come down, that could be more than compensated for by the rise in volumes,” Ms. Raw adds. “And so you actually can see quite good revenue, earnings and cash flow growth on a three-year view for companies like Rio and Fortescue, both of which are also just coming off very high capital expenditure plans, so that we can translate that spending into volume growth and cash flow growth.”